The 4-Minute Exposure Map Every Landlord Should Draw
Okay, so here's a four-minute job I want you to do tonight. Before the rugby, before Netflix, before you check the WhatsApp group one more time.
Take one sheet of paper and draw three columns: everything you own, whose name each item is in, and which debts you personally signed for. Then draw a line from your rental to everything else that shares its name. Every line is a door a claim against that rental can walk through. Most landlords find it's every line on the page.
I call it the exposure map. When I bought my first place in Amsterdam back in 2003, my map would have been one big scribble: flat in my name, 100% mortgage in my name, savings in my name. Everything in one basket. I didn't draw it then. I wish I had.
How do you draw an exposure map?
You need a pen, a sheet of paper and four honest minutes. Honest is the hard part.
Column 1: What you own. Everything of value. Your pozzie. Your car. Your savings and investments. Any rental property. Anything you'd hate to lose.
Column 2: Whose name it's in. Next to each item, write the owner: you, your spouse, both of you, or a company.
Column 3: What you personally signed for. Every debt with your signature on it: your home bond, the rental's bond, car finance, credit cards, and any surety you've signed for anyone. Ja, including the one you signed for a friend's business years ago and forgot about.
Okay, so how do you draw the lines?
Find your rental in column 1. Draw a line from it to every other item in column 1 that has the same name in column 2. Then draw a line from it to every debt in column 3 that you personally signed.
Done? Now look at it. Properly.
What do the lines on an exposure map mean?
Every line is a door.
If something goes wrong with that rental, the claim is against the owner. A tenant slips on wet tiles. A contractor says he wasn't paid. The geyser bursts at 2am on a long weekend and takes the downstairs neighbour's ceiling with it. A dispute ends up in court.
When the owner is you, that claim can walk through every door on your page. For most people it isn't one line. It's every line on the page. Yoh.
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Ja, but what does a "good" exposure map look like?
When a rental is owned by a company:
Column 2 for that rental says the company's name, not yours.
Claims from tenants and contractors generally go to the company.
The only lines from the rental to your personal life are the ones you chose to sign. Usually that's the surety on the bond.
That's the honest picture, and I'm not going to dress it up. A company doesn't make you untouchable. It turns "every line on the page" into one line you drew on purpose.
Example: what Sam's exposure map shows
An illustrative example, not a real person.
Sam owns a house, a car, R200,000 in savings and one rental flat, all in Sam's name. Sam signed for the home bond, the rental bond and the car.
Sam's map has six lines from the rental: to the house, the car, the savings, and to all three debts. A serious claim against the flat has a path to almost everything Sam owns.
If Sam's next flat goes into a company, that flat's map has one line: Sam's surety on its bond. Same Sam. Very different page.
Why don't more landlords draw it?
Here's what I've seen over twenty-odd years. The challenge is hardly ever the property. It's belief. People would rather tell themselves a story about why it'll never happen to them than spend four minutes looking.
And the lines aren't the only cost of owning everything in your own name. When I was buying in my own name, I could only do one deal at a time: fix it up, sell it, free up the bond affordability, then go again. Sequential instead of parallel. The exposure map shows you the risk. The bond ceiling is the other half of the same problem.
What I'd watch for
This isn't legal advice. It's a way to see your exposure. An attorney can tell you how a specific claim would play out.
Joint names matter. If you're married in community of property, your spouse's assets may sit on the same side of the line.
Insurance still matters. The map shows how far a claim can reach. Insurance is what pays for it. Don't skimp on it to save a few hundred bucks a month.
Where the company fits
The map makes the problem visible without an accountant or a spreadsheet. The fix for the next property is simple and cheap: decide the container before you buy. For properties you already own, moving them is possible, but it involves the bank and professional advice, so don't rush it.
FAQ
Can a tenant sue me personally if my rental is in my own name?
If you're the owner and landlord, claims are generally made against you, and they can reach your personal assets.
Does a company remove all my personal risk?
No. Debts you sign for personally, like a bond you stand surety for, can still reach you. A company limits exposure. It doesn't eliminate it.
How often should I redo my exposure map?
Whenever you buy, sell or sign for something new. It takes four minutes.
Turn every line into one
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Education only. This article is general information, not tax, legal or financial advice. Speak to a registered tax practitioner, attorney or financial adviser about your own situation.
About the author
Michael Bowen co-founded ZAHomes. He bought his first property in 2003 on the outskirts of Amsterdam, with a 100% mortgage, at the wrong point in the cycle, and lost over €14,000 on it while sanding the floors himself in a heatwave. Twenty-odd years, 40-odd countries and a lot of property school fees later, he lives in Cape Town and teaches South Africans to buy and hold property inside a company. His view hasn't changed: an investor's greatest assets are the lessons from their failed deals.
